Shareholders mull legal action against CBN’s bank dividend policy

Minority and retail shareholders have called on the Central Bank of Nigeria (CBN) to rescind its newly amended dividend payment policy for deposit money banks (DMBs), threatening to take legal action against the apex bank if it failed to withdraw the policy.

Minority and retail shareholders under the auspices of Pragmatic Shareholders Association (PSA) said the CBN’s dividend policy for banks runs contrary to the current efforts aimed at encouraging retail investors in the Nigerian capital market.

In a communiqué issued at the end of their emergency meeting at the weekend, the shareholders said the apex bank was chasing a wild goose by shifting the blame of non-performing loans to shareholders rather than addressing the underlying causes of non-performing loans.

Under the amended dividend policy, banks that do not meet the minimum capital adequacy ratio (CAR) will not be allowed to pay dividend. Also, banks with non-performing loans (NPLs) above 10 per cent will not be allowed to pay dividend. Banks that meet the minimum CAR requirement, but have NPL ratio of more than 5.0 per cent, but less than 10 per cent will be allowed to pay a maximum of 30 per cent of earnings as dividend. Banks with CAR of at least 3.0 per cent above minimum requirement and NPL ratio of more than 5.0 per cent, but less than 10 per cent will be allowed to pay up to a maximum of 75 per cent of earnings as dividends while banks that meet the minimum capital adequacy ratio and non-performing loan ratio have no regulatory restrictions and can pay dividend as wish.

Shareholders said the apex bank should take the blame for the level of non-performing loans in the Nigerian banking industry, alleging that the bad debts were as a result of the failure of the apex bank to efficiently discharge its regulatory functions.

They alleged that the board and management of the CBN cannot be absolved from the high level complicity and sabotage that have continued to fuel recurring bad loans.

“The apex bank owes it a duty to Nigerians and the international community to publish profiles of loan defaulters and invoke operating laws through the banks on all bad loans,” the communiqué, signed by PSA’s National Coordinator, Mrs Bisi Bakare stated.

They called on the National Assembly to intervene and protect the domestic retail shareholders from what they described as kill-joy policies of the apex bank.

According to the association, the use of dividend payment as bad debt management tool will not only have negative impact on the domestic capital market and national capital accumulation, but may also encourage defaulters.

The association also chided the Securities and Exchange Commission (SEC) “for abandoning and reneging on its corporate responsibilities to shareholders”.